XACC 280 Week 7

CheckPoint: Ratio, Vertical, and Horizontal Analyses

The calculations you perform for this CheckPoint form the basis of your analysis of your capstone

project.

Write in 100 to 200 words an explanation of the three tools of financial statement analysis

and the function of each.

Examine PepsiCo, Inc.s Consolidated Balance Sheet on p. A6 in Appendix A of Financial

Accounting, especially its Current Assets, Current Liabilities, and Total Assets for years 2005

and 2004.

Calculate the following for PepsiCo, Inc. and show your work:

o The Current Ratio for 2005

o The Current Ratio for 2004

o Two measures of vertical analysisfor example, compute the current assets divided by

total assets for each year, and express your result as a percentage

o Two measures of horizontal analysisfor example, compute the total change in assets

by percentage, by dividing current assets in 2005 by current assets in 2004. Compute a

similar percentage for current liabilities

Examine The Coca-Cola Companys Consolidated Balance sheet on p. B2 in Appendix B of

Financial Accounting, especially its Current Assets, Current Liabilities, and Total Assets for

years 2005 and 2004.

Calculate the following for Coca-Cola and show your work:

o The Current Ratio for 2005

o The Current Ratio for 2004

o Two measures of vertical analysisfor example, compute the current assets divided by

total assets for each year, and express your result as a percentage

o Two measures of horizontal analysisfor example, compute the total change in assets

by percentage, by dividing current assets in 2005 by current assets in 2004. Compute a

similar percentage for current liabilities

Post your explanation and calculations.

Exercise: Career Opportunities for Accountants

Post your response to the following items:

o Describe two business sectors you might want to work in if you were an accountant and

explain why in 150 to 200 words.

o Research a specific company in one of the business sectors that interests you and

describe how you imagine it might be to work there. Use 100 to 150 words for your

description.

Week 7 DQs:

Select three ratios, one from each categoryliquidity, profitability, and solvencyyou think

are the most important.

Why do you consider these ratios important? Which internal and external users might be

most interested in these ratios? Explain why.

Respond to postings of your classmates who selected different ratios than those you

selected. Comment on the significance of these ratios and which users might be most

interested in them.

Review Illustrations 15-17 through 15-24 on pp. 710714 of Financial Accounting.

Given the data, would you have invested in Quality Department Store in 2006? Explain why

or why not. Summarize your analysis of the financial data to support your reasoning. What

recommendations would you make to improve the financial health of this company? Explain

why.

Respond to your classmates postings, by agreeing or disagreeing with their assessments

while pointing to the data and specific ratio, vertical, or horizontal analyses.